What is the best way to resolve an issue with line Manager without affecting your performance report?

Why would an issue with line manager affect to performance? It shouldn't! A line manager who has selfrespect, is cooperative and respects his/her staff will understand these are two different items.
Vindictive line manager should be doing something else than people management.

I agree with Anita that it should not affect the performance report, but also, I agree that it might be and this is due to the national culture that control employees behaviors.to back to your question:
1- don't discuss the issue while you are stressed or angry as you will not be able to control your emotional reactions.
2- Prepare before you raise the issue with your manager: what are the causes of the issue, what is the proposed solutions, what is the implications.
3- be very impressive with your professionalism in discussing the issue so that you gain his attraction.
Finally, although it might be depressing, mostly managers of such attitude are very week and lack the expertise and that is why they try to manage autocratically in order to hide his weakness.
In case your boss is of such type, I will not suggest to confront him as he will not listen and this might fire back on you.
Such managers get terrified if they find skilled employees as they fear to have his chair.

Respect is very important to me.
As an employee, I try to respect my boss not only by following his guidance, but also by seeking his guidance.
When a trusting relationship is formed, I have often found that my bosses have appreciated concerns or options that I raised to them.
They know that I support them, and I know that they respect me.

The simplest answer could be that once there is an issue always suggest a solution that would not only create positive mind set in your boss head but also help to fix those issues.

1st step identify the root cause of the issue.
the issue you see on surface is mostly not the real deal, the real issue mostly hidden behind or understand the surface.2nd step evaluate the worth of the issue.3rd discuss it without going into emotional state, be professional.